Month: May 2023

(C) Reuters

Investing.com — U.S. stocks are seen opening with small losses Wednesday, with investors continuing to focus on the passage of the deal to lift the debt ceiling through Congress as the month comes to an end.

At 06:55 ET (10:55 GMT), the Dow futures contract was down 65 points, or 0.2%, S&P 500 futures traded 8 points, or 0.2% lower, and Nasdaq 100 futures dropped 25 points, or 0.2%.

The agreement to suspend the ceiling on U.S. government borrowing for a couple of years cleared an important hurdle on Tuesday, as the House Rules committee signed off on the deal, despite objections from hard-line conservative Republicans.

This clears the way for it to be brought before the lower chamber of Congress as soon as later Wednesday, hopefully allowing the Senate to sign it into law before the federal government runs out of funds in early June.

However, lawmakers on both sides of the aisle have spoken out against it, meaning its passage is still not a certainty.

Heading into the final trading day of May, the main indices had performed in a mixed fashion, with the tech-heavy Nasdaq Composite leading the way, up almost 7.8% on the month. The S&P 500 is up over 2%, while the Dow Jones Industrial Average has fallen 1.9%.

Aside from political developments, investors are also data-watching ahead of Friday’s official jobs report. That report will be closely watched by the Federal Reserve, which is now expected to raise interest rates by another quarter of a percentage point when it meets next month.

Ahead of that, the job openings report for the end of April is due later in the session, and is expected to come in at 9.775 million, which would be up from the prior month.

The Federal Reserve’s Beige Book will also be of interest and a number of Fed officials are also scheduled to speak.

In corporate news, HP (NYSE:HPQ) stock fell sharply premarket after the PC maker posted its lowest revenue for a quarter since early 2020, noting ongoing weakness in demand for personal computers.

Goldman Sachs (NYSE:GS) stock also fell premarket following a number of reports indicating that the investment banking giant is set to cut around 250 more jobs in the coming weeks on the back of a sluggish market for deals.

Oil prices weakened Wednesday after the disappointing Chinese economic data raised further concerns about the economic recovery in the second-largest economy in the world and the largest crude importer.

These worries stand in contrast to the optimism at the beginning of this year, and raised questions over whether a rebound in the country will drive oil demand to record highs this year.

U.S. crude inventories are also due later in the session from industry group American Petroleum Institute, following on from last week’s hefty draw of 6.8M barrels.

By 06:55 ET, U.S. crude futures traded 2.5% lower at $67.70 a barrel, while the Brent contract dropped 2.2% to $72.09.

Additionally, gold futures fell 0.1% to $1,975.35/oz, while EUR/USD traded 0.5% lower at 1.0679.

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(C) Reuters. FILE PHOTO: President Joe Biden shakes hands with House Speaker Kevin McCarthy of Calif., after the State of the Union address to a joint session of Congress at the Capitol, Tuesday, Feb. 7, 2023, in Washington. Jacquelyn Martin/Pool via REUTERS/File Ph
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By Moira Warburton and David Morgan

WASHINGTON (Reuters) – Legislation brokered by President Joe Biden and House Speaker Kevin McCarthy to lift the $31.4 trillion U.S. debt ceiling and achieve new federal spending cuts passed an important hurdle late on Tuesday, advancing to the full House of Representatives for debate and an expected vote on passage on Wednesday.

The House Rules Committee voted 7-6 to approve the rules allowing debate by the full chamber. Two committee Republicans, Representatives Chip Roy and Ralph Norman, bucked their leadership by opposing the bill.

That vote underscored the need for Democrats to help pass the measure in the House, which is controlled by Republicans with a narrow 222-213 majority.

House passage would send the bill to the Senate. The measure needs congressional approval before June 5, when the Treasury Department could run out of funds to pay its debts for the first time in U.S. history.

If the Treasury Department cannot cover make all its payments, or if it was forced to prioritize payments, that could trigger economic chaos in the U.S. and global economies.

Biden and McCarthy have predicted they will get enough votes to pass the 99-page bill into law before the June 5 deadline.

The non-partisan budget scorekeeper for Congress on Tuesday said the legislation would reduce spending from its current projections by $1.5 trillion over 10 years beginning in 2024.

The Congressional Budget Office also said the measure, if enacted into law, would reduce interest on the public debt by $188 billion.

McCarthy called the bill the “most conservative deal we’ve ever had.”

Nevertheless, some of the House’s most conservative Republicans who sought far deeper spending reductions were not persuaded and it was unclear how many Democrats McCarthy will need to win Wednesday’s anticipated vote on passage.

All four Democrats on the Rules Committee voted against the bill, as they typically do on Republican-backed legislation. It was unclear whether that might influence other Democrats to do the same on Wednesday, even as Democratic Leader Hakeem Jeffries said his party would provide the support McCarthy needs.

Many Democrats in Congress did not want Biden to engage in budget-cutting negotiations with Republicans until they lifted their hold on enacting a debt limit bill.

SENATE BATTLE AHEAD

White House Budget Director Shalanda Young, who was one of Biden’s lead negotiators, urged Congress to pass the bill.

“I want to be clear: This agreement represents a compromise, which means no one gets everything that they want and hard choices had to be made,” Young told a news conference.

A Senate vote could possibly stretch into the weekend if lawmakers in that chamber try to slow its passage.

At least one senator, Republican Mike Lee, has said he may try to do so, and other Republicans have also expressed discomfort with some aspects of the deal.

The bill would suspend the U.S. debt limit through Jan. 1, 2025, allowing Biden and lawmakers to set aside the politically risky issue until after the November 2024 presidential election.

It would also cap some government spending over the next two years, speed up the permitting process for some energy projects, claw back unused COVID-19 funds, and introduce work requirements for food aid programs for some poor Americans.

In another win for Republicans, it would shift some funding away from the Internal Revenue Service, although the White House says that should not undercut tax enforcement.

Biden can point to gains as well. The deal leaves his signature infrastructure and green-energy laws largely intact, and the spending cuts and work requirements are far less than Republicans had sought.

Republicans have argued that steep spending cuts are necessary to curb the growth of the national debt, which at $31.4 trillion is roughly equal to the annual output of the economy.

Interest payments on that debt are projected to eat up a growing share of the budget as an aging population pushes up health and retirement costs, according to government forecasts. The deal would not do anything to rein in those fast-growing programs.

Most of the savings would come by capping spending on domestic programs like housing, education, scientific research and other forms of “discretionary” spending. Military spending would be allowed to increase over the next two years.

The debt-ceiling standoff prompted ratings agencies to warn that they might downgrade U.S. debt, which underpins the global financial system.

Markets have reacted positively to the agreement so far.

(C) Reuters.

Investing.com — Stocks in focus in premarket trade on Wednesday, May 31st. Please refresh for updates.

HP (NYSE:HPQ) stock fell 6.2% after the PC maker posted its lowest revenue for a quarter since early 2020, noting ongoing weakness in demand for personal computers.

Goldman Sachs (NYSE:GS) stock fell 1.7% following a series of reports indicating that the investment bank is set to cut around 250 more jobs in the coming weeks given the sluggish market for deals.

Capri (NYSE:CPRI) stock fell 2.7% after the Michael Kors parent reported a slowdown in its U.S. market, overshadowing a sales rebound in China following the easing of pandemic-related curbs late last year.

Nvidia (NASDAQ:NVDA) stock fell 1.8%, retreating after the chipmaker on Tuesday joined the exclusive club of companies with a $1 trillion market capitalization as market demand for artificial intelligence.

Hewlett Packard Enterprise (NYSE:HPE) stock fell 8.7% after the information technology company missed expectations for second quarter revenue as clients scale down spending on tech, including cloud services, amid an economic slowdown.

Ambarella (NASDAQ:AMBA) stock slumped 20% after the semiconductor reported a weaker-than-expected outlook for the second quarter, prompting KeyBanc to downgrade its stance to ‘sector weight’ from ‘overweight’.

Avis Budget (NASDAQ:CAR) stock rose 4.1% after Deutsche Bank upgraded its stance on the car rental firm to ‘buy’ from ‘hold’, saying the company’s shares can rise more than 60%.

American Airlines (NASDAQ:AAL) stock rose 1.4% after the carrier raised its outlook for second quarter profit as it expects to pay less for jet fuel compared with its previous estimate.

LL Flooring (NYSE:LL) stock soared 20% after the retailer of hard-surface flooring received an unsolicited bid from Cabinets to Go, a unit of F9 Brands.

(C) Reuters.

By Davit Kirakosyan

Here is your Pro Recap of the biggest analyst picks you may have missed since yesterday: upgrades at Chevron, Xylem, and Fluent, and a buy initiation at Five9.

InvestingPro subscribers got this news first. Never miss another market-moving headline.

Chevron upgraded to Neutral at JPMorgan

JPMorgan upgraded Chevron (NYSE:CVX) to Neutral from Underweight and raised its price target to $170.00 from $161.00.

According to the firm, Chevron’s valuation fully accounts for the company’s LSD production growth potential led by high-margin assets (Permian, Tengiz) and commitment to a long-term return of capital plan that should hold through the cycle.

After a period of underperforming, the firm believes that Chevron is not excessively expensive compared to its peer group, especially ExxonMobil (NYSE:XOM), its closest peer.

(C) Reuters

Investing.com — The stage is set for a dramatic vote on the debt ceiling bill in the House of Representatives as the June 5 default deadline ticks ever closer. Meanwhile, disappointing economic data casts doubt over the strength of China’s post-COVID recovery and Goldman Sachs reportedly plans fresh job cuts.

1. Debt ceiling deal heads to the House

The U.S. House of Representatives could vote on a bill to raise the $31.4 trillion debt ceiling as soon as today, with only days left until the country could tip into a damaging default.

Despite objections from hard-line conservative Republicans, the House Rules committee signed off on the deal on Tuesday, clearing the way for it to be brought before the lower chamber of Congress.

The agreement, which would suspend the borrowing limit until 2025 and place caps on some government spending, needs approval from both the House and the Senate before it can be enacted into law. The Treasury Department has warned that the federal government may run out of funds to pay its bills on June 5 if the debt ceiling is not lifted.

U.S. President Joe Biden and Republican House Speaker Kevin McCarthy – the two major players in a weeks-long series of fraught negotiations – have said they are hopeful that Congress will give a green light to the deal they hashed out last weekend. However, lawmakers on both sides of the aisle have spoken out against it, meaning its passage is still not a certainty.

2. Chinese economic data disappoints

The nascent recovery in China’s key manufacturing sector may be losing steam after new data showed that factory activity in the country tumbled for the second month in a row.

China’s official manufacturing purchasing managers’ index was 48.8 in May, below the expected 51.4 and the prior month’s reading of 49.2. The sub-50 reading, which indicates contraction, signaled sluggishness in a rebound in the world’s second-largest economy that began earlier in the year following the removal of strict COVID-19 rules.

Non-manufacturing PMI, a gauge of activity in other industries including services, also slowed.

The fading post-pandemic consumption surge has some economists predicting that Beijing could roll out new stimulus measures to boost growth. But deeper structural issues, including a waning property boom and ongoing tensions with key Western trading partners, remain.

3. Futures inch lower

U.S. stock futures pointed lower on Wednesday, as investors kept a cautious eye on the debt ceiling drama in Washington and the weak manufacturing figures in China.

At 04:51 ET (08:51 GMT), the Dow futures contract lost 97 points or 0.29%, S&P 500 futures dipped by 14 points or 0.32%, and Nasdaq 100 futures fell by 51 points or 0.35%.

The benchmark S&P 500 ended the previous session broadly unchanged, while the Nasdaq Composite added 0.32%. Tech shares in particular were boosted by a fresh rally in Nvidia (NASDAQ:NVDA) stock that briefly brought the chipmaker — itself a beneficiary of a surge in interest in artificial intelligence-related companies — above a $1 trillion valuation.

Elsewhere, the Dow Jones Industrial Average edged down by around 51 points, or 0.1%.

4. Oil drops amid Chinese data worries

Oil prices slipped on Wednesday, with the weaker-than-anticipated economic data out of China raising concerns around the outlook for the world’s biggest crude importer.

Questions swirled around whether the country’s post-pandemic rebound will still drive oil demand to record highs this year, as had initially been hoped for at the beginning of 2023.

Sentiment was, however, partly aided by the progress of the debt ceiling bill in Washington. Traders are anxious to see if lawmakers can avert a possibly catastrophic default that threatens to plunge the U.S. — the largest oil consumer — into a recession.

By 04:49 ET, U.S. crude futures traded 1.05% lower at $68.73 a barrel, while the Brent contract dropped 1.11% to $72.89 per barrel.

5. Goldman Sachs reportedly mulls more layoffs

The job cuts may not be over yet at Goldman Sachs (NYSE:GS).

According to multiple media reports, the investment banking giant is planning to reduce its headcount by under 250 in the coming weeks, with the roles of managing directors and some partners potentially on the chopping block. The Wall Street Journal first reported on the layoffs.

Goldman, helmed by Chief Executive David Solomon, has already unveiled two recent rounds of dismissals. The bank released about 500 workers last September and around 3,200 workers earlier this year.

At the end of March, the bank employed 45,400 people — 6% less than the total in the fourth quarter of 2022.

A source quoted by Reuters said Goldman is looking to keep a tight hold on its budget this year as elevated interest rates hit dealmaking.